The truth about the Trump economy

President Donald Trump speaks to media Oct. 20, 2018, in Elko, Nev. The claim that the president has raised the economy from the doldrums and injected it with new vitality is largely a myth. (Carolyn Kaster/AP)

Donald Trump and his legions are not tightly tethered to factual reality, but they are willing to grab on to it when it suits them. One of those occasions is when the official unemployment rate — which as a candidate he denounced as “the biggest joke there is in this country” — comes down, as it did in October, reaching 3.7 percent.

For voters on the fence, who may not like his many coarse and racist views, the state of the economy may be enough to persuade them to vote Republican on Tuesday. Even critics have to admit that whatever else he has done wrong, Trump has managed not to turn the boom to bust. The combination of solid growth, low inflation and unemployment, and rising hourly wages is hard to beat.

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Republicans give all credit to Trump and the GOP-dominated Congress for cutting taxes, rolling back regulations, creating jobs and restoring the American spirit of enterprise. But the claim that the president has raised the economy from the doldrums and injected it with new vitality is largely a myth. As an economic player, he was born on third base and thinks he hit a triple.

Growth has been good, with gross domestic product rising at a rate of 4.2 percent in the second quarter of this year and 3.5 percent in the third. But the euphoria being felt by Republicans was absent when GDP growth exceeded 4.2 percent in four different quarters under Barack Obama. The trick is to sustain such high rates, which Obama couldn’t and which Trump has yet to prove he can.

Though unemployment has fallen, job growth has not actually accelerated. In the first 21 months of Trump’s tenure, the economy added fewer jobs than it did in the previous 21 months.

For a long time, he took credit for the rising stock market. But the Dow fell by 5.1 percent last month, and the S&P 500 dropped 6.9 percent — making it, The Wall Street Journal noted, “the worst October for the S&P 500 since 2008.”

The stock market is still well above the level on Election Day 2016, with the S&P 500 up by 27 percent. But that index rose by 35 percent over the same period in Obama’s first term.

The tax cuts Trump signed may well have boosted growth. But Republicans might not want to look too closely behind the improvement. An analysis by The Wall Street Journal concluded that “faster government spending accounted for nearly half of the acceleration” that has occurred since April 2017.

Corporate tax cuts were supposed to unleash a flood of business investment. But it grew at only a 0.8 percent pace last quarter, the slowest in three years.

The immediate benefits of the tax cuts also have to be weighed against the long-term harms. The budget deficit ballooned by 17 percent in the fiscal year that ended in September, and the Congressional Budget Office estimates that the tax package will add $1.9 trillion in government debt over the next decade.

The regulatory rollback may also be good for some industries, particularly those that pollute. But putting more toxins in our air and water and more greenhouse gases into the atmosphere will work to the eventual detriment of human health, the climate and the overall economy.

If Trump’s tax cuts and deregulation are welcome in the business world, his trade policies have not been. He discarded the Trans-Pacific Partnership and placed new tariffs on steel, aluminum, solar panels and a range of Chinese goods.

Economist Steven J. Davis of the University of Chicago and the Hoover Institution maintains an index of “trade policy uncertainty.” It has consistently been higher during Trump’s time in office than at any time since 1994. Davis says the president’s trade policy has had a “small negative effect on U.S. business investment” and “has the potential to cause a good deal more economic pain.”

Then there is the low inflation brought about by the Federal Reserve, which lately Trump has blasted for raising interest rates. Were the Fed to defer to his wishes, we could be in for a future of rapidly rising prices.

The American economy is showing a vitality that Trump is happy to attribute to his policies. But what it needs now is a president who grasps that the best thing to do is to stay out of the way. And staying out of the way is not something Trump likes to do.